Klarizze Puzon

The Dynamics of Lobbying under Uncertainty: On Political Liberalization in Arab Countries

We consider a framework a la Wirl (1994) where political liberalization is the outcome of a lobbying differential game between a conservative elite and a reformist group, the former player pushing against political liberalization in opposition to the latter. In contrast to the benchmark model, we introduce uncertainty. We consider the typical case of an Arab oil exporter country where oil rents are fiercely controlled by the conservative elite. We assume that the higher the oil rents, the more reluctant to political liberalization the elite is. Two states of nature are considered (high vs low resource rents). We then compute the Market-perfect equilibria of the corresponding piecewise deterministic differential game. It is shown that introducing uncertainty in this manner increases the set of strategies compared to Wirls original setting. In particular, it is shown that the cost of lobbying might be significantly increased under uncertainty with respect to the benchmark. This ultimately highlights some specificities of the political liberalization at stake in Arab countries and the associated risks.

On the Timing of Political Regime Changes: Theory and Application to the Arab Spring

We develop a continuous time dynamic game to provide with a benchmark theory of Arab Spring-type events. We consider a resource-dependent economy with two interacting groups, the elite vs. the citizens, and two political regimes, dictatorship vs. a freer regime. Transition to the freer regime can only be achieved if citizens decide to revolt given the concession/repression policy of the elite. Departing from the related literature, the revolution optimal timing is an explicit control variable in the hands of citizens. The elite is the strategic leader: she ultimately chooses her policy knowing the reaction function of citizens. In this framework, we provide with a full equilibrium analysis of the political regime switching game and notably emphasize the role of the direct switching cost of the citizens and of the elites self-preservation options. In particular, we show how the incorporation of explicit revolution timing may change the conventional wisdom in the related institutional change literature. Finally, we emphasize how the theory may help explaining some key features of the Arab Spring.

Location Decision of Foreign Direct Investment: The Role of Environmental Policy and Natural Resources

This paper examines whether lax environmental policy and abundant natural resources both attract foreign direct investment (FDI). At first, their potential effects are discussed using arguments from the pollution haven hypothesis and the natural resource curse. Using cross-country Ordinary Least Square (OLS) regressions and robustness checks like Instrumental Variable Two-Stage Least Squares (IV-2SLS), it was observed that foreign firms prefer to locate in countries that are resource-abundant or resource export-dependent. Inward FDI also tend to be directed toward countries with relatively stricter environmental regulations.